Federal coal leasing reform sparks discussion
September 22, 2015
A series listening sessions on the federal coal leasing program spurred participation and comment from groups on both sides of the issue.
The U.S. Department of the Interior and Bureau of Land Management hosted the sessions to seek public comment on how the BLM can ensure that the American taxpayers receive a fair return on federal coal resources.
BLM is responsible for leasing coal on approximately 570 million federally owned acres across the United States. Over the past 10 years, BLM-managed lands produced around 5.1 billion tons of coal valued over $72 billion. According to BLM, this production generated $7.9 billion in royalties and nearly $4 billion in revenues from rents, bonuses and other payments.
Craig Mayor Ray Beck was in attendance at the Denver listening session in August and had the opportunity to address representatives from DOI and BLM on the topic.
"The most threatening thing to our community and our economy right now is the federal government and the perpetuation of a never-ending onslaught of regulations creating the perfect storm that may leave our community on life support," Beck said to the panel.
Opponents of the current program are claiming coal companies are gaming the system by selling coal to their own subsidiaries at below-market prices.
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"Leadville knows both the positive and negative impacts of mining. It is imperative that local communities receive a fair return on those resources. I applaud the BLM for inviting American taxpayers' voices to be heard on this issue. We have to fix the federal coal program to ensure that mining leaves the environment better than before operations began," said Leadville Mayor Jaime Stuever in a statement.
To address the concerns, the Office of Natural Resources Revenue proposed a rule that eliminates loopholes by reforming the way federal coal is valued for royalty assessment.
According to a study from Headwater Economics, an independent, nonprofit research group, if the new rule is imposed "royalty revenue could increase by $139 million annually, a 20 percent increase, with 91 percent of new revenue generated in Wyoming. On average, gross delivered prices would rise by $0.28 per ton, or a 1.6 percent increase. Demand for coal for the domestic power sector would fall by nearly 1 million tons annually, a 0.2 percent decline."
Senior Vice President of Tri-State Generation and Transmission Association, which operates Craig Station, the second-largest coal-fired power plant in Colorado, Barbara Waltz defended the current leasing program in a comment letter to ONRR.
"This proposal upsets established and well-founded expectation is not only unfair, but risks raising breach of contract and other legal claims," she wrote. "ONRR cannot unilaterally decide to alter a key economic term of a lease agreement to extract additional financial consideration after the fact."
Jeremy Nichols, Climate and Energy Program director for the environmental advocacy group WildEarth Guardians, said he appreciates Jewell's effort to create dialogue about modernizing the nation's coal program but DOI needs to be upfront about its goals.
"I'll add that we're not here because of royalties. On this point, I agree with the coal industry that we're really here to discuss the future of the federal coal program," he said at the Denver session.
Lee Boughey, senior manager of corporate communications and public affairs for Tri-State, echoed this notion in an email on Tuesday.
"Efforts to increase the federal coal royalty rate are a transparent effort to discourage the responsible use of coal for reliable and affordable power generation," he wrote. "The impact to our members from higher royalty rates will be significant. As a co-op operating on a not-for-profit basis, any increase on royalty rates, fees or taxes results in higher electricity rates to our members."